Thanks for this report.  libvirt does indeed use dnsmasq by default:

libvirt+    5964  0.0  0.0   9244  1772 ?        S    Jan28   0:01 
/usr/sbin/dnsmasq --conf-file=/var/lib/libvirt/dnsmasq/default.conf 
--leasefile-ro --dhcp-script=/usr/lib/libvirt/libvirt_leaseshelper
root        5965  0.0  0.0   9216   332 ?        S    Jan28   0:00 
/usr/sbin/dnsmasq --conf-file=/var/lib/libvirt/dnsmasq/default.conf 
--leasefile-ro --dhcp-script=/usr/lib/libvirt/libvirt_leaseshelper


# netstat -tulpn | grep dnsmasq
tcp        0      0 10.170.67.1:53          0.0.0.0:*               LISTEN      
1679878/dnsmasq     
tcp        0      0 192.168.122.1:53        0.0.0.0:*               LISTEN      
5964/dnsmasq        
tcp        0      0 10.69.244.1:53          0.0.0.0:*               LISTEN      
3230/dnsmasq        
tcp6       0      0 fd42:7d02:9a49:5192::53 :::*                    LISTEN      
3230/dnsmasq        
tcp6       0      0 fe80::ec9d:3bff:fefa:53 :::*                    LISTEN      
3230/dnsmasq        
udp        0      0 10.170.67.1:53          0.0.0.0:*                           
1679878/dnsmasq     
udp        0      0 192.168.122.1:53        0.0.0.0:*                           
5964/dnsmasq        
udp        0      0 10.69.244.1:53          0.0.0.0:*                           
3230/dnsmasq        
udp        0      0 0.0.0.0:67              0.0.0.0:*                           
1679878/dnsmasq     
udp        0      0 0.0.0.0:67              0.0.0.0:*                           
5964/dnsmasq        
udp        0      0 0.0.0.0:67              0.0.0.0:*                           
3230/dnsmasq        
udp6       0      0 fd42:7d02:9a49:5192::53 :::*                                
3230/dnsmasq        
udp6       0      0 fe80::ec9d:3bff:fefa:53 :::*                                
3230/dnsmasq        
udp6       0      0 :::547                  :::*                                
3230/dnsmasq 

Upstream's documentation describes the configuration settings:

https://wiki.libvirt.org/page/Libvirtd_and_dnsmasq

I'm unsure if there's more that could/should be done on Ubuntu's side to
support this use case but will mark it as Wishlist for now.

** Changed in: libvirt (Ubuntu)
   Importance: Undecided => Wishlist

** Changed in: libvirt (Ubuntu)
       Status: New => Triaged

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https://bugs.launchpad.net/bugs/1920658

Title:
  libvirt starts an instance of dnsmasq for every interface it creates,
  even if decided not to supply dhcp

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